Tuesday, October 08, 2013

Disappointing not to see bulls make a better challenge on 'bull traps'. Now indices are left with it all to do. Broader channels point to a bull trend, and it will be left to the Dow to indicate how such channels will play as support.

The initial prognosis is not good. The Dow cleanly sliced below channel support and will probably see a test of the 200-day MA tomorrow.

The Nasdaq experienced a big volume sell off to take the index from its 20-day MA to the 50-day MA. Slow stochastics are a long way from triggering the 'sell' trigger to turn technicals net bearish, but the MACD, +DI/-DI, and On-Balance-Volume are all on 'sell' triggers. While the 50-day MA is a buying opportunity it's hard to see it play as such tomorrow.

The S&P turned net negative technically. Slow stochastics [39,1] were the last to turn bearish. Although the S&P is seeing a resurgence against the Russell 2000.

Finally, the Russell 2000 lost big ground to push it just below its 50-day MA. Channel support is the level to look too.

After today it would appear the 'bull traps' are here to stay - at least for a little while longer. It will be hard for bulls to make up the ground without at least a week of buying. 50-day MAs could offer the buying opportunity to build such an advance, although given the extent of the drop channel support is a more likely bounce point.